Analysis of the current situation and future development trend of China's construction machinery industry in 2018

2018-11-12

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First, the industry "barometer" sales of excavators increased
 
 
The top 50 global construction machinery manufacturers had revenue of $133 billion in 2016, down 16.2 percent year-on-year. According to the list of the top 50 global construction machinery manufacturers in 2017, caterpillar, komatsu and Hitachi construction group rank the top three global construction machinery manufacturers in the industry. Their sales volume of the construction machinery business in 2016 reached us $21.338 billion, us $14.053 billion and us $6.585 billion, accounting for 16.5%, 10.9% and 5.1% of the market share respectively. In terms of Chinese enterprises, xugong group, sany heavy industry and zoomlion are the top three domestic enterprises. Their sales volume of construction machinery business in 2016 was $477.1 billion, $3.542 billion and $3.029 billion respectively, ranking the 8th, 11th and 14th in the world, with market share of 3.7%, 2.7% and 2.3% respectively
 
 
China's excavator sales over the years
 
Data source: open data collation
 
Related report: 2018-2024 China construction machinery leasing industry operation situation and investment prospect forecast report released by zhiyan consulting
 
Domestic excavator market pattern (by country)
 
Data source: open data collation
 
Since the recovery of China's construction machinery industry in the fourth quarter of 2016, the monthly sales of the industry "barometer" excavators have repeatedly exceeded expectations. The last high growth in the construction machinery industry dates back to the government's $4 trillion investment stimulus in 2008, when sales of excavators, for example, climbed to more than 190,000 a year. In 2012, the demand of the industry fell rapidly, and then entered a period of deep adjustment for five consecutive years. The annual sales volume of excavators fell to 60,500 in 2015, only about 30% of the peak. Since the fourth quarter of 2016, the upward trend of the industry bottoming has been confirmed, and the monthly sales of excavators repeatedly exceeded expectations. Analyze the reasons of high demand, mainly including the following. First, after five years of deep adjustment, the pent-up demand is being gradually released under the influence of multiple factors, such as the double-digit growth rate of infrastructure investment for many years and the recovery of mining industry. Second, from the point of view, update demand by 2016 at the end of the domestic excavator ownership has reached around 1.5 million units, and in April 2016, the formal implementation of "about the implementation of the national phase iii of mobile machinery announcement of diesel engine exhaust emissions standards, emissions of substandard products will be forced out, thus stimulating the demand change. At the same time, under the influence of supply-side reform, the boom of mining industry has been effectively improved, and the demand for large-scale mining has been boosted.
 
Up to October 2017, the 25 host suppliers included in the statistics achieved a total of 11.25 million excavators sales, up 98.2 percent year-on-year. Among them, the sales volume of excavators reached 10,54 units in October, up 81.2% year on year, and still maintained a high growth rate of more than 80% in the same period of last year on the basis of a high base. In terms of the number of hours for excavators, according to statistics, the number of hours for construction machinery starting up in September was 137.1 hours, 3.3 hours on a month-on-month basis and 3.1 hours on a year-on-year basis. The "excavator index" has obtained the statistical results by monitoring over 20% of excavator data in China. According to the statistical data in June, the number of operating hours in the same period of 2017 has increased to 113.35 hours after the industry trough, up by 28% year-on-year, showing a u-shaped reversal trend.
 
Komatsu domestic excavator working hours
 
Data source: open data collation
 
The average operating hours of domestic excavation
 
Data source: open data collation
 
According to the construction sequence, concrete machinery, crane and other construction machinery products are expected to show similar recovery. Generally speaking, crane, concrete machinery as a post-cycle product, with a lag of about 3 months to 6 months. Judging from the current sales data, crane, concrete machinery is expected to continue the strong recovery of excavators. According to statistics, the cumulative sales volume of wheeled cranes reached 14,661 by September 2017, up 120.47% year-on-year, and the annual sales volume was around 35,000 at the peak of the industry boom in 2011. In terms of concrete pump vehicles, sany heavy industry achieved sales revenue of 6.609 billion yuan in the first half of 2017, an increase of 32% year on year. The growth rates of the same period from 2013 to 2016 were -39.60%, -8.73%, -32.60% and -27.00%, respectively. In the first half of 2017, zoomlion achieved sales revenue of 3.626 billion yuan, up by 71.58 percent year-on-year, and the growth rate in the same period from 2013 to 2016 was -47.19 percent, -32.47 percent, -52.96 percent and -25.50 percent, respectively.
 
China's wheel crane sales over the years
 
Data source: open data collation
 
China's concrete pump car sales over the years
 
Data source: open data collation
 
Second, the manufacturing industry is located in the business zone, infrastructure, "One Belt And One Road" multi-directional development
 
Manufacturing PMI continues to be in the boom zone above the line. The engineering machinery industry is closely related to manufacturing prosperity and social new credit activity. In this round of construction machinery recovery, the overall improvement of the manufacturing industry provides a strong guarantee for the sustainability of the industry reversal. According to the latest data, in October 2017, the PMI of the manufacturing industry was 51.6%. Although affected by the long holiday, it decreased by 0.8 percentage points month-on-month and increased by 0.4 percentage points year-on-year. This is the 15th consecutive month standing above the line of expansion and contraction since August 2016.
 
The first three quarters of the new credit overall stable. Single equipment of construction machinery is of great value, and the payment method mainly includes payment in full, installment, bank mortgage payment and financing lease payment. As bank mortgage and financial leasing are the most important payment means in the industry, the industry prosperity is closely related to the social credit scale. In the first three quarters of 2017, accumulated new loans of RMB reached 11.16 trillion yuan, up by 9.84% year-on-year, and the scale of social financing remained stable.
 
Manufacturing PMI
 
Data source: open data collation
 
New renminbi loans
 
Data source: open data collation
 
Investment in infrastructure has maintained a double-digit growth rate, with transportation, civil aviation, farmland and water conservancy as important components. China's infrastructure investment will maintain a year-on-year growth rate of around 20 percent in 2017, and the overall scale is expected to reach about 16 trillion yuan. In the whole year of 2016, 227 fixed-asset investment projects were examined and approved by the national development and reform commission, with a total investment of 17,04.4 billion yuan. Key areas of China's fixed asset investment in 2017 will include urban and rural infrastructure, major transportation projects, major projects or pillar industries based on supply-side structural reform.
 
From January to September 2017, infrastructure investment (excluding power, heating, gas and water production and supply industries) reached 99,652 billion yuan, up 19.8 percent from a year earlier. Among them, the total investment of fixed assets in highway construction amounted to 1,375 billion yuan, up by 23.9% year on year. China's fixed asset investment in railways reached 545.5 billion yuan, up by 0.6% year-on-year. Investment in fixed assets totaled 5.7 million yuan, up 16.3 percent year-on-year. According to the three-year action plan for major transportation infrastructure construction (2016-2018), the number of key transportation infrastructure projects in China has reached 303 in the past three years, with a total investment of about 4.7 trillion yuan, among which railways and urban rails account for the largest proportion.
 
Infrastructure investment (excluding power) cumulative year over year
 
Data source: open data collation
 
Fixed asset investment in highway construction
 
Data source: open data collation
 
National railway fixed assets investment
 
Data source: open data collation
 
Fixed asset investment in airport construction
 
Data source: open data collation
 
In 2017, the construction of major water conservancy projects will be accelerated, with 15 major projects planned to be started, and the investment model under construction will exceed 900 billion yuan. In 2016, China's investment in water conservancy construction completed was 609.96 billion yuan, up by 11.87 percent year-on-year. Among them, large and medium-sized projects were 108 billion yuan, up 25.58 percent year-on-year. Small and other projects valued at 5,01.96 billion yuan, up 9.31 percent year-on-year. Meanwhile, China's accumulated investment plan for central water conservancy construction has been steadily increasing year by year since 2013, and the planned amount in 2016 has increased significantly to 223.3 billion yuan, up by 32.52 percent year-on-year. As of October 2017, the cumulative investment plan of the central government for water conservancy construction in China has reached 254.58 billion yuan, of which the central government invested 558.6 billion yuan, accounting for 61.22 percent.
 
The amount of investment completed in water conservancy construction in China
 
Data source: open data collation
 
Our country accumulative arrangement central water conservancy construction investment plan
 
 
Data source: open data collation
 
 
Benefiting from supply-side structural reform, the mining industry has improved profitability to drive the demand for large excavators. Statistics showed that from January to June 2017, a total of 111 million tons of coal capacity was withdrawn in China, and 74% of the annual target of 150 million tons was fulfilled. Supply-side structural reform has boosted the profitability of the energy and resources exploration and development sector. In the first three quarters of 2017, the domestic coal mining industry realized a profit of 226.2 billion yuan, up 7.2 times year-on-year.
 
 
Investment amount of fixed assets in coal mining and washing industry
 
 
 
Data source: open data collation
 
 
Total profits from coal mining and washing
 
 
 
Data source: open data collation
 
 
The PPP mode facilitates infrastructure projects and the landing rate rises steadily. Up to September 2017, the total number of PPP warehousing projects in China reached 14,220, with a cumulative investment of about 17.8 trillion yuan. The whole life cycle of PPP projects includes five stages: identification, preparation, procurement, execution and handover. The ratio between the sum of the execution and transfer projects and the number of projects in the whole life cycle is the landing rate. In the first three quarters of 2017, the number of national demonstration projects was 572, the investment scale was 14,74.1 billion yuan, and the floor rate reached 82.1%. The number of managed database projects reached 2,388, and the investment scale reached 40,92.3 billion yuan, with the landing rate rising to 35.2%, up 3.6 percentage points from the same period last year.
 
Total investment in PPP projects
 
Data source: open data collation
 
PPP project landing rate
 
Data source: open data collation
 
Municipal engineering leads the pack, accounting for about 36.99 percent of the total. From the composition of projects that have been implemented, the proportion of municipal engineering, transportation and comprehensive urban development occupies the top place. In the first three quarters of 2017, the amount of investment in projects that have been implemented was 15,16.6 billion yuan, 1165.3 billion yuan, 465.8 billion yuan, 36.99%, 28.42% and 11.36% respectively. Specific to municipal engineering, mainly including rail transit and municipal road.
 
The demand for PPP mode in western regions is huge, and the growth rate of excavator sales in corresponding regions has been leading since the beginning of the year. In terms of geographical distribution, western regions accounted for the largest proportion of PPP projects, reflecting the strong local demand for PPP models. There are 2,687, 1,949, 1,868 and 270 projects in the four major regions of western, eastern, central and northeastern regions, accounting for 39.7%, 28.8%, 27.6% and 4.0%, respectively. Investment was 4.2 trillion, 3.0 trillion, 2.4 trillion and 0.6 trillion respectively, accounting for 41.4%, 29.5%, 23.7% and 5.5%. Since the beginning of the year, the sales of excavators have been distributed in the region, with the western region leading the eastern and central regions by a large margin. In the first three quarters of 2017, the cumulative sales volume of excavators in the west, east and central regions reached 36,911, 29,443 and 28,937, respectively. As more PPP projects enter the landing stage, the continuous demand for excavators is worthy of expectation.
 
Industry distribution of PPP projects (by investment)
 
Data source: open data collation
 
Specific components of municipal engineering (2016Q3)
 
Data source: open data collation
 
PPP management database statistics by region (item)
 
Data source: open data collation
 
Statistics of project investment by region (RMB 100 million)
 
Data source: open data collation
 
During the 13th five-year plan period, the infrastructure of countries along the belt and road of One Belt And One Road is estimated to be over $10.6 trillion, of which about $1.4 trillion is needed by countries along the belt and road of China. In 2016, China signed $244 billion in new contracts for foreign projects, up 16.2% year on year. Of these, the number of new contracts signed by 61 countries along the "One Belt And One Road" line reached 8,158, and the contract amount reached $126 billion, up 36.01% year-on-year. In terms of the latest data, as of the first half of 2017, new contracts for external contracted projects in the "One Belt And One Road" market were signed at $123.8 billion, and the year-on-year growth rate further increased to 24.2%.
 
The amount of new contracts signed for foreign projects
 
Data source: open data collation
 
New contract amount for project contracting in countries along "One Belt And One Road"
 
Data source: open data collation
 
Based on the active infrastructure investment demand of countries along "One Belt And One Road", it has become the target market for China's construction machinery industry to "go out", and the industrial chain layout of related enterprises has achieved considerable results. In the first half of 2017, the total export volume of China's construction machinery industry was 90.81 billion us dollars, up by 10.10 percent year-on-year. Specifically, in terms of the "One Belt And One Road" market, China's construction machinery exports to the "One Belt And One Road" countries reached $8.73 billion in 2016, up 2.8 percent year-on-year, accounting for 51.47 percent of China's total construction machinery exports in that year. Domestic giants of construction machinery equipment, including sany, are speeding up their presence overseas, especially in markets along the "One Belt And One Road" route. In the field of host manufacturer, sany heavy industry, for example, its overseas revenue exceeded 10 billion yuan for the first time in 2015. According to the five-year operation plan of "11123", its overseas sales plan achieved operating revenue of 10 billion us dollars by 2022, among which the market along "One Belt And One Road" accounted for 60%. In the field of core parts suppliers, for example, hengli hydraulic co., ltd. is expected to increase its overseas business income to 50% in the future from about 30% currently.

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